What does an FD do?

There are so many accountants! External, internal, tax advisors, auditors, FDs, CFOs, bookkeepers, management accountants, financial controllers………

I may not be poacher turned gamekeeper but I have worked both in the profession and in industry and have seen the very best and the not so good!

Typically, a small business will have an external firm of accountants producing their accounts and tax returns. If the external accountants are good, they’ll be giving the business tax and remuneration advice as well as contributing to business strategy and planning. I’d like to say that this is standard practice but in my experience, it simply isn’t.

Big companies have external accountants for audit work and tax advice. They also have a finance team headed up by a Finance Director or CFO.

The finance team produces management accounts that are used to provide information to the management team so that they understand the financial performance of their business and make informed decisions. It’s the FDs job to ensure this information is accurate, reliable and timely. The FD will also ensure that financial performance is forecast for the future and that these forecasts are based on reasonable assumptions.

Of course, small businesses don’t need FDs because they fully understand their financial performance and always make informed decisions. Or, do they? Do you?

I have seen many entrepreneurs start off knowing exactly what they are doing and succeeding. And then, at some point on the journey, things start getting more difficult. Margins should be fine, overheads are under control so where’s the cash. And why, when the external accountants produce the year-end accounts six months after the year-end are they not what you expected?

I call this the ‘Hunger Point’. Your spouse/partner will know when this happens. You’ll come home grumpy, frustrated or complaining about your staff. You’re hungry for information. How much cash will you have next month? Which jobs are really making you a profit? What was the financial performance of your business yesterday?

And that’s where I come in. There is nothing more satisfying than helping a CEO answer these questions and seeing them make informed decisions to grow their business.

So what does this mean in practice? Well, first of all you need the right systems and there has been a revolution in systems for small businesses. You really can see your financial performance on your smartphone. You also need to get the fundamentals right and this means having the right structure, for whatever system you are using, and making sure that the information is being entered correctly, whether it’s being done by your in-house staff or external accountants and bookkeepers.

Of course, small businesses don’t have full-time FDs like big companies. Having spent over 10 years working as and managing part-time FDs, I know that the answer lies in accessing the FD's skills when, and only when you need them.

Take a look at ‘Who’s in your finance team’ to see what an FD can do for you.